Cotton procurement poised to hit record level in 2014-15

Fibre procurement by Cotton Corporation Of India (CCI) has touched 8.6 million bales so far this marketing year, a tad short of the record level of 8.9 million bales hit six years ago, chairman of the state-run agency said on Wednesday. With cotton arrivals in the market expected to continue at least through May, procurement is all set to breach the record level in the current year through September.

As much as 30.2 million bales of cotton arrived in the domestic market until Tuesday, compared with 30.6 million bales a year before, CCI chairman BK Mishra told FE. One bale equals 170 kg.

Procurement this year — especially in the initial phase — picked up after the cotton prices had dropped below the benchmark prices set by the Centre, thanks to plentiful supplies and poor demand from top importer China. The agency is holding stocks worth around R17,000 crore now.

The agency had procured just 40,813 bales in the whole of last marketing year through September 2014. Most of the purchases this year have been from Andhra Pradesh and Maharashtra, the leading producers after Gujarat.

Mishra said CCI’s purchases have slowed down in the last few days, as prices have inched up a bit. However, if cotton rates go below the minimum support prices (MSPs) again, the agency would resume procurement, he added. The CCI procures cotton from farmers at the MSP to avoid distress sales by them and sells the stocks in the market later. Any loss out of the procurement operation is reimbursed by the government.

In November last year, textiles minister Santosh Kumar Gangwar had asked the CCI to ramp up purchases from farmers, as cotton prices had crashed by around a quarter then from a year before.

No plan to sell huge stocks immediately

Despite demand by traders’ body, Cotton Association of India, Mishra said the CCI doesn’t intend to offload huge stocks immediately, as it could worsen an already glut-like situation in the market and hurt realisations of farmers selling cotton now. “Around 25% of the crop is yet to arrive in the market. We will seriously think of offloading good amount of cotton stocks once 90% of the crop arrival in the market is over. And when we sell huge amount of stocks, our focus would be on small and medium textile mills,” he said.

Since exports have crashed this fiscal, the domestic market already has enough cotton to meet consumption. Cotton exports, in value term, slumped 36% in the April-December period from a year before due to a slowdown in purchases by China.

Of the procured stocks, the CCI has so far sold only 2.7 lakh bales. Unlike some other government-backed agencies, the CCI isn’t facing any shortage of funds for its procurement operations, Mishra added.

Cotton output could miss CAB forecast

Mishra said, based on the arrivals data so far, the country’s cotton production may be a tad lower than the forecast. A smaller crop is expected in the northern region as well as Gujarat, he said. “However, a precise estimate is yet to be firmed up and CAB would do that,” Mishra added.

In October last year, CAB had projected a record harvest of 40 million bales of cotton for 2014-15, marginally higher than 39.8 million bales a year before.